# Davis v. CSAA Ins. Exchange

> California Court of Appeal · September 8, 2025

URL: https://www.frixlaw.com/law-library/cases/11134483

## Case

- **Court:** California Court of Appeal
- **Decided:** September 8, 2025
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

Filed 9/8/25
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

JOSEPH DAVIS et al.,
Plaintiffs and Appellants,
v. A169729
CSAA INSURANCE EXCHANGE,
(Alameda County Super. Ct.
Defendant and Respondent.
No. 22CV014132)

Plaintiffs Joseph Davis and Shavonda Early brought this class action
lawsuit against defendant CSAA Insurance Exchange (CSAA), 1 claiming that
automobile insurance rates became excessive during the COVID-19 pandemic
when there was less driving and fewer traffic accidents. They alleged that
CSAA had a statutory obligation to refund premiums paid during that period,
even though the premiums were collected under rates previously approved by
the insurance commissioner. The trial court ruled that CSAA had no such
obligation, and it sustained CSAA’s demurrer without leave to amend. We
affirm.

1 CSAA is an automobile insurance company. Plaintiffs alleged that, in
2020 and 2021, CSAA was the fifth largest automobile insurance company in
the state and insured over one million California drivers.

1
I.
BACKGROUND
After initially bringing separate class actions, plaintiffs alleged in a
consolidated complaint that CSAA was required to refund paid automobile
insurance premiums because rates the commissioner had previously
approved became “excessive” during the COVID-19 pandemic. The complaint
alleged two causes of action under California’s Unfair Competition Law (Bus.
& Prof. Code § 17200 et seq.) (UCL) and a cause of action for unjust
enrichment. The complaint alleged that, by not unilaterally refunding
premiums, CSAA violated Insurance Code section 1861.05, subdivision (a)
(section 1861.05(a)). 2 This section, titled “Approval of Insurance Rates,”
provides that “[n]o rate shall be approved or remain in effect which is
excessive, inadequate, unfairly discriminatory or otherwise in violation of
this chapter.”
CSAA filed a demurrer, which the trial court sustained with leave to
amend. The court interpreted section 1861.05(a)’s language that no excessive
rate shall “remain in effect” as applying to the insurance commissioner’s
system of approving rates, and meant to “ensure that a previously approved
rate does not ‘remain in effect’ if the circumstances have changed.” The court
found that the statute allowed for prospective rate reductions when rates
become excessive, but not retroactive modifications of previously approved
rates.
In their first amended and consolidated complaint, plaintiffs reasserted
the UCL claims, and reiterated that CSAA received an “unprecedented
windfall” from the COVID-19 pandemic by continuing to charge preapproved
rates as driving and traffic accidents decreased dramatically. At the same

2 All further statutory references are to the Insurance Code unless

otherwise noted.

2
time, plaintiffs acknowledged that some refunds were given. They recognized
that, in April 2020, the insurance commissioner issued a bulletin directing
insurers to “make an initial premium” refund for the prior two months.
Although CSAA gave a 20 percent refund to policyholders, plaintiffs alleged
that this amount was inadequate and the approved rates for this period
remained excessive. Plaintiffs also recognized that the commissioner sent
additional bulletins extending the directive for refunds. Although CSAA
subsequently gave a 10 percent refund for May and June 2020, plaintiffs
alleged that the rates were still excessive. According to plaintiffs, in 2021 the
commissioner described the premium returns by California insurance
companies as “insufficient.” 3
Plaintiffs asserted that CSAA’s failure to provide sufficient refunds
violated section 1861.05(a) and was unfair and unlawful. They sought
restitution for the “unearned premiums acquired from [named plaintiffs] and
the Class along with CSAA’s investment returns on those unearned
premiums.”
CSAA again demurred, and this time the trial court sustained the
demurrer without leave to amend. Referring to its prior ruling’s
interpretation of section 1861.05(a) and citing State Farm General Insurance
Company v. Lara (2021) 71 Cal.App.5th 148, 160 (Lara), the court held that

3 We grant plaintiffs’ unopposed request for judicial notice of bulletins

and letters issued by the insurance commissioner, as well as filings from
CSAA’s rate application. (Evid. Code, § 452, subd. (c); Harris v. Alcohol Bev.
etc. Appeals Bd. (1965) 62 Cal.2d 589, 595 [granting judicial notice of
insurance bulletins].) We deny plaintiffs’ opposed request for judicial notice
of documents, including rulemaking comments, CSAA internal rules and
regulations, and materials related to other legislation and cases, as not
presented to the trial court below and not necessary or helpful to our
analysis. (Cal. Rules of Court, rule 8.252; Jordache Enterprises, Inc. v.
Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6.)

3
the “remain in effect” phrase “does not mean that a previously approved rate
becomes unlawful if circumstances change.” It determined that the statutory
scheme permits insurance companies to charge rates that the insurance
commissioner has approved, and it reasoned that the companies can no more
be required to retroactively lower premiums based on preapproved rates than
they can be required to retroactively increase them.
Judgment was entered in favor of CSAA, and this appeal followed.
II.
DISCUSSION
The central question in this appeal is whether section 1861.05(a)
imposes an independent obligation on insurers to refund premiums that were
collected under approved rates when those rates later become purportedly
excessive. This presents a question of statutory interpretation, and to
answer it we apply well-settled principles of statutory construction and
exercise our independent judgment. (California Cannabis Coalition v. City of
Upland (2017) 3 Cal.5th 924, 933–934 (Cannabis Coalition).)
Section 1861.05(a) was enacted through the passage of Proposition 103
in 1988. (20th Century Ins. Co. v. Garamendi (1994) 8 Cal.4th 216, 239–240
(20th Century).) As the statute was enacted by the people, our primary task
is to give effect to the voters’ intended purpose. (Cannabis Coalition, supra,
3 Cal.5th at p. 933.) To do so, we look first at the plain language of the
provision, “which is typically the best and most reliable indicator of purpose.”
(Ibid.) “We start by ascribing to words their ordinary meaning, while taking
account of related provisions and the structure of the relevant statutory . . .
scheme.” (Ibid.) “If the provision[’s] intended purpose nonetheless remains
opaque, we may consider extrinsic sources, such as an initiative’s ballot
materials.” (Id. at p. 934; see Legislature v. Deukmejian (1983) 34 Cal.3d

4
658, 673, fn. 14 [“Ballot summaries and arguments may be considered when
determining the voters’ intent and understanding of a ballot measure”].)
A. Proposition 103
We begin with an overview of Proposition 103. The proposition began
with findings that “[e]normous increases in the cost of insurance have made
it both unaffordable and unavailable to millions of Californians” and “existing
laws inadequately protect consumers and allow insurance companies to
charge excessive, unjustified[,] and arbitrary rates.” (Ballot Pamp., Gen.
Elec. (Nov. 8, 1988) text of Prop. 103, § 1, p. 99.) Its stated purpose was “to
protect consumers from arbitrary insurance rates and practices, to encourage
a competitive insurance marketplace, to provide for an accountable Insurance
Commissioner, and to ensure that insurance is fair, available, and affordable
for all Californians.” (Ibid.) Proposition 103 was one of five competing
insurance initiatives on the ballot, but the only one that passed. (Id.,
argument in favor of Prop. 103, p. 100; Sect. of State, certification of election
results (Dec. 22, 1988).)
Proposition 103 “made numerous fundamental changes in the
regulation of automobile and other forms of insurance in California.” (20th
Century, supra, 8 Cal.4th at p. 240.) Regarding the setting of insurance
rates, the measure had two main components. (Lara, supra, 71 Cal.App.5th
at p. 160.) The first imposed a “ ‘rollback period’ ” from November 1988 to
November 1989, requiring insurers to reduce charges on automobile
insurance policies “ ‘to levels which are at least 20% less than the charges for
the same coverage which were in effect on November 8, 1987.’ ” (20th
Century, at pp. 242, 253; see also Calfarm Ins. Co. v. Deukmejian (1989)
48 Cal.3d 805, 813 (Calfarm); § 1861.01, subd. (a).) This was a “temporary
regulatory regime of rate reduction and freeze” that was “evidently designed

5
to allow the setting up of a permanent regulatory regime to follow.” (20th
Century, at p. 243.)
The second component of rate setting created a permanent “prior
approval” system that required insurance rates to be approved by the
insurance commissioner before they could be charged. (§ 1861.01, subd. (c)
(section 1861.01(c)); 20th Century, supra, 8 Cal.4th at p. 240.) Before
Proposition 103, rates were regulated by “the so-called ‘open competition’
system.” (20th Century, at p. 240.) Under this system, “ ‘California ha[d] less
regulation of insurance than any other state,’ ” and “ ‘California automobile
liability insurance [was] less regulated than most other forms of insurance.’ ”
(Ibid.)
Proposition 103 added section 1861.05 as part of the prior-approval
system. As we have said, the section is titled “Approval of Insurance Rates.”
Subdivision (a) states in full: “No rate shall be approved or remain in effect
which is excessive, inadequate, unfairly discriminatory or otherwise in
violation of this chapter. In considering whether a rate is excessive,
inadequate or unfairly discriminatory, no consideration shall be given to the
degree of competition and the commissioner shall consider whether the rate
mathematically reflects the insurance company’s investment income.” The
remaining subdivisions of section 1861.05 specify various procedures related
to such approval, including provisions requiring insurers to file rate
applications with the commissioner when they want to change any rate.
(§ 1861.05, subd. (b).)
Proposition 103 required automobile insurance rates to be determined
by applying three factors—the insured’s driving safety record, the annual
number of miles driven, and the years of driving experience—and it allowed
the insurance commissioner to adopt additional factors. (§ 1861.02,

6
subd. (a).) It prohibited rates that were “unfairly discriminatory” and
specified that the business of insurance was subject to California’s unfair
business practice laws. (§§ 1861.05, subd. (a), 1861.03, subd. (a).)
Proposition 103 also designated the insurance commissioner to be an
elected official, no longer appointed by the governor. (§ 12900; Foundation
for Taxpayer & Consumer Rights v. Garamendi (2005) 132 Cal.App.4th 1354,
1372.) Proponents of the measure argued that doing so would result in lower
rates and increased scrutiny of consumer complaints regarding rates that
were in effect. (Ballot Pamp., Gen. Elec., supra, rebuttal to argument against
Prop. 103, p. 101.) Previously, although the Department of Insurance (CDI)
had authority to investigate insurance rates after they took effect, the
investigations were “limited” in both scope and frequency. (Id., analysis by
legislative analyst, p. 98.)
Finally, Proposition 103 included provisions related to consumer
participation. It authorized consumers to ask the insurance commissioner to
hold hearings on proposed rate changes. (§ 1861.05, subd. (c)(1).)
Section 1861.10, subdivision (a), provided: “Any person may initiate or
intervene in any proceeding permitted or established pursuant to this
chapter, challenge any action of the commissioner under this article, and
enforce any provision of this article.”
B. Interpretation of Section 1861.05(a)
With this statutory overview in mind, we turn to the language of
section 1861.05(a). In arguing that the section imposes an independent
obligation on insurers to issue refunds when approved rates become
excessive, plaintiffs focus on the language in the first sentence that no
“excessive” rate shall “remain in effect.” (§ 1861.05(a).) We agree with
plaintiffs that there is some ambiguity when viewing this language in

7
isolation, because the sentence uses the passive voice and does not specify an
enforcement mechanism. But when viewing this language in context, its
meaning is clear.
To begin with, the section’s title, “Approval of Insurance Rates,”
signifies that the provision is directed at the role of the commissioner. And
the second sentence in section 1861.05(a) establishes that considering
whether a rate is excessive falls within that role. It reads: “In considering
whether a rate is excessive, inadequate or unfairly discriminatory, no
consideration shall be given to the degree of competition and the
commissioner shall consider whether the rate mathematically reflects the
insurance company’s investment income.” (§ 1861.05(a), italics added.) As
plaintiffs concede, approval of rates is solely within the commissioner’s
purview. Nothing in section 1861.05(a)’s plain language or structure evinces
an intent to impose an obligation on insurers to independently refund
premiums that were paid under approved rates.
The ballot materials accompanying Proposition 103 support this view.
They explained that the insurance commissioner would be required under the
new “prior approval” system “to review and approve rate changes before they
go into effect.” (Ballot Pamp., Gen. Elec., supra, analysis by legislative
analyst, p. 98.) Opponents of the measure then argued that the
commissioner would have “enormous new powers” and, as an elected official,
would become “preoccupied with raising campaign money from special
interests all too willing to ‘buy’ influence.” (Id., argument against Prop. 103,
p. 101.) Proponents did not dispute that Proposition 103 would broaden the
commissioner’s authority and responded: “[N]o wonder the insurance
companies don’t want an elected Insurance Commissioner—in the states
where people elect Insurance Commissioners, rates average 30% lower than

8
in California.” (Id., rebuttal to argument against Prop. 103, p. 101.) These
materials confirm that the rate approval and review process implemented by
Proposition 103, and as reflected in section 1861.05(a), was focused on the
commissioner’s expanded role and concomitant obligations.
Plaintiffs offer arguments for a contrary interpretation of
section 1861.05(a) based on its language, other statutes added by
Proposition 103, and the measure’s overall purpose. We turn to examine
these arguments, none of which are persuasive.
1. “Approved” and “remain in effect” language
Plaintiffs contend that the term “approved” and the phrase “remain in
effect” in section 1861.05(a) are two distinct directives, and the latter phrase
would be surplusage if the statute were interpreted to impose no obligation
on insurers to unilaterally refund previously approved rates when
circumstances render them excessive. But we view these directives as
pertaining to the commissioner’s approval of rates and review of rates,
respectively.
As plaintiffs acknowledge, the insurance commissioner can not only
approve new rates but also review rates already in effect. There are multiple
mechanisms to initiate such review. For example, CDI promulgated a
regulation expressly “[a]s a means to determine whether a rate previously
approved remains in compliance with the statutory standard set forth in
[section] 1861.05(a).” (Cal. Code Regs., tit. 10, § 2644.50.) Under this
regulation, the commissioner can require insurers that have been charging
premiums under approved rates for more than three years to file a rate
application, triggering a new approval process. (Ibid.) Consumers can also
trigger commissioner review of existing rates. Under section 1858,
subdivision (a), any person “aggrieved” by a rate charged, a rating plan, or a

9
rating system can file a written complaint with the commissioner requesting
such review. Section 1858.01, subdivision (a), then requires the
commissioner to conduct a review, investigate the matter, and determine
whether there is probable cause to believe a violation occurred. The
commissioner’s determination is subject to judicial review by petition for writ
of administrative mandamus. (§§ 1858.6, 1861.09.)
Plaintiffs argue that these mechanisms are inadequate because they do
not mandate review of all rates at all times and would allow insurers to
maintain excessive rates “indefinitely” in violation of section 1861.05(a). But
it is evident that the reforms in Proposition 103 were designed to allow the
insurance commissioner and aggrieved persons to initiate review of
potentially excessive rates when they consider it necessary and to obtain
lower rates going forward when appropriate. These reforms guard against
excessive rates being charged indefinitely.
2. Other statutes
Plaintiffs argue that our interpretation conflicts with other statutory
provisions that Proposition 103 added. Section 1861.03, subdivision (a),
states that insurance businesses are subject to California’s unfair business
practice laws, and section 1861.10, subdivision (a), provides that “[a]ny
person may initiate or intervene in any proceeding permitted or established
pursuant to this chapter, challenge any action of the commissioner under this
article, and enforce any provision of this article.” While we agree that these
provisions allow consumers and interested parties to enforce Proposition 103,
they do not allow for the enforcement of an obligation that the measure never
created.

10
3. Purpose of Proposition 103
Plaintiffs argue that declining to impose an obligation on insurers to
independently refund premiums paid under approved rates cannot be
harmonized with Proposition 103’s purpose and its express directive that the
measure be “liberally construed and applied in order to fully promote its
underlying purposes.” (Ballot Pamp., Gen. Elec., supra, text of Prop. 103, § 8,
subd. (a), p. 144.) But plaintiffs offer no authority suggesting the liberal
construction clause can be invoked to enlarge the meaning of section
1861.05(a). (Cf. Skidgel v. California Unemployment Ins. Appeals Bd. (2021)
12 Cal.5th 1, 23 [explaining that construction “ ‘should not exceed the limits
of the statutory intent’ ”].) Moreover, the explicit purpose of Proposition 103
was “to protect consumers from arbitrary insurance rates and practices, to
encourage a competitive insurance marketplace, to provide for an accountable
Insurance Commissioner, and to ensure that insurance is fair, available, and
affordable for all Californians.” (Ballot Pamp., Gen. Elec., text of Prop. 103,
§ 1, p. 99.) Accordingly, its objective was “not just to keep insurance rates
fair to consumers, but also to keep insurance available—which requires that
rates be fair to the insurers as well.” (Lara, supra, 71 Cal.App.5th at p. 176.)
That dual purpose is reflected in section 1861.05(a), which states that no rate
shall remain in effect that is “excessive” or “inadequate.”
Moreover, the statutory interpretation plaintiffs advance presents a
significant concern for which they have no satisfactory answer. As the trial
court explained, there is nothing in section 1861.05(a) suggesting that any
obligation by insurers under the statute would be one-sided and apply only to
refunds. Instead, requiring insurers to retroactively refund premiums when
preapproved rates become “excessive” would mean that insurers could
demand retroactive higher premiums from policyholders if preapproved rates

11
were found “inadequate.” Plaintiffs argue that an asymmetrical obligation
requiring refunds but denying increases is acceptable because insurers have
more bargaining power and can apply for rate increases. But this position
has no basis in the language of section 1861.05(a), the overall statutory
scheme, or the dual purpose of Proposition 103.
Nor do plaintiffs grapple with the practical consequences of their
proposed “continuous” independent obligation for insurers to maintain rates
that do not become “excessive.” They contend that CSAA’s failure here was
“not for a brief, incidental, or theoretical time, but over the prolonged period
of reduced traffic and claims during the COVID-19 pandemic.” But again,
nothing in section 1861.05(a) suggests any minimum time period necessary to
establish insurers’ non-compliance with their purported obligation. This
would seemingly allow challenges to rates that the commissioner approved
but that became allegedly “excessive” even for the smallest amount of time,
undermining the “prior approval” system Proposition 103 was intended to
implement.
C. Decisional Law
Our interpretation of section 1861.05(a) is also consistent with Lara,
which the parties recognize as the primary published California authority on
the issue. In that case, State Farm applied to the insurance commissioner to
increase its homeowners insurance rates but, upon consideration, the
commissioner ordered State Farm to decrease its rate retroactively and issue
refunds. (Lara, supra, 71 Cal.App.5th at pp. 158–159.) State Farm filed a
petition for a writ of mandate, and the trial court issued a peremptory writ of
mandate setting aside the order. (Id. at p. 159.) The appellate court agreed
that the retroactive rate and refund were impermissible. (Ibid.)

12
Lara reasoned that the “prior approval” system, including the
insurance commissioner’s role in approving and reviewing rates, operates
prospectively. (Lara, supra, 71 Cal.App.5th at pp. 188–189.) The court
pointed to section 1861.01(c), which “requires that rates be set before their
use, and apply prospectively.” (Lara, at p. 189.) And it rejected a different
reading based on the “remain in effect” language of section 1861.05(a). (Lara,
at p. 189.) Lara explained: “Construed in context, this language simply
reflects that when a rate is reviewed and does not satisfy prior approval
requirements (such as by being excessive), it will not go into effect or will no
longer stay in effect. This is consistent with section [1861.01(c)]’s prospective
orientation.” (Lara, at pp. 189–190.)
Plaintiffs argue that Lara is either distinguishable or was wrongly
decided and should be rejected here. Neither argument is persuasive.
1. Lara is not distinguishable.
Plaintiffs emphasize that Lara was decided in a different factual
context, as it concerned the insurance commissioner’s authority in an
administrative proceeding and not “what insurers and the courts can or
cannot do” under Proposition 103. But we see nothing in Lara’s statutory
interpretation of section 1861.05(a) or section 1861.01(c) that depends on or is
unique to the decision’s factual context.
Plaintiffs also suggest that Lara’s analysis does not apply because the
relief they seek is not retroactive in nature. Specifically, plaintiffs maintain
that their request for refunds would be “prospective action” done “in the
interim” while applying for a lower rate, in order to “avoid future legal
consequences.” We reject this overly strained characterization. “In deciding
whether the application of a law is prospective or retroactive, we look to
function, not form.” (Elsner v. Uveges (2004) 34 Cal.4th 915, 936–937.) We

13
ask whether the law “ ‘change[s] the legal consequences of past conduct by
imposing new or different liabilities based upon such conduct” and
“substantially affect[s] existing rights and obligations.” (Id. at p. 937.) Here,
the first amended and consolidated complaint sought restitution for past
premiums charged by CSAA and related investment returns it obtained.
That relief would clearly affect CSAA’s existing rights to those sums and
impose new liability based on CSAA’s past conduct.
2. Lara was correctly decided.
Plaintiffs alternatively argue that even if Lara is not distinguishable, it
was wrongly decided and we should decline to follow it. They first argue that
Lara misinterpreted section 1861.01(c), contending that the provision merely
“sets the date” for the “prior approval” system to go into effect but does not
“provide any substantive meaning as to how that system works.” We
disagree. The plain language of section 1861.01(c) articulates the
fundamental feature of Proposition 103’s “prior approval” system: that
“insurance rates subject to this chapter must be approved by the
commissioner prior to their use.”
Plaintiffs also contend that Lara’s interpretation of section 1861.01(c)
allows insurers a “safe harbor” to charge excessive rates in violation of
section 1861.05(a). Again, we disagree. Lara rejected the availability of
retroactive refunds for premiums based on approved rates because, under
section 1861.01(c), insurers are entitled to charge approved rates. (Lara,
supra, 71 Cal.App.5th at pp. 188–189.) While Proposition 103 does not
provide for retroactive refunds, it does provide for the insurance
commissioner’s approval and review of rates, including those already in
effect. This allows the commissioner to determine whether rates remain in

14
compliance with the section 1861.05(a) standard and, if not, to correct them
going forward.
Second, plaintiffs repeatedly cite a single word from Lara: that State
Farm was not only entitled but “required” to charge the approved rate under
section 1861.01(c) until a different rate was approved. (Lara, supra,
71 Cal.App.5th at p. 194.) Plaintiffs contend that the cases cited by Lara to
support this proposition—Walker v. Allstate Indemnity Co. (2000)
77 Cal.App.4th 750 (Walker) and MacKay v. Superior Court (2010)
188 Cal.App.4th 1427 (MacKay)—have since been “discredited.”
In Walker, the trial court sustained a demurrer in a class action
alleging insurers charged rates that were approved by the commissioner but
nevertheless “excessive” within the meaning of section 1861.05(a). (Walker,
supra, 77 Cal.App.4th at p. 753.) The appellate court affirmed, concluding
that under section 1861.01(c) and other statutory provisions, “insurers must
charge the approved rate and cannot be held civilly liable for so doing.”
(Walker, at p. 756.) And in MacKay, the plaintiff alleged that an insurer’s
rating practices violated section 1861.02, subdivision (a)’s permissible factors
for determining rates and premiums. (MacKay, supra, 188 Cal.App.4th at
p. 1432.) The appellate court was thus presented with the same question as
we are: “[W]hether, after a rate has been approved, an insured may pursue a
civil action to challenge what it believes to be an illegal rate.” (Id. at
pp. 1431–1432.) It concluded that “the statutory provisions for an
administrative process (and judicial review thereof) are the exclusive means
of challenging an approved rate.” (Id. at p. 1432.)
Plaintiffs argue that Walker and MacKay “cannot survive” our state
Supreme Court’s analysis in Villanueva v. Fidelity National Title Co. (2021)
11 Cal.5th 104 (Villanueva), even though they recognize that Villanueva is

15
not a Proposition 103 case. The question in Villanueva was whether
statutory immunity under section 12414.26—for acts done “ ‘pursuant to the
authority conferred’ ” by rate-filing provisions—shielded title insurers from
suit for charging unauthorized rates. (Villanueva, at pp. 110–111.) The
Supreme Court concluded it did not. (Ibid.) Neither Walker nor MacKay
involved assertions of section 12414.26 immunity or unapproved rates.
(Walker, supra, 77 Cal.App.4th at p. 753; MacKay, supra, 188 Cal.App.4th at
p. 1434.) The same is true here: CSAA has made clear, in its demurrer and
on appeal, that it is not asserting statutory immunity, and plaintiffs concede
that the insurance commissioner approved the rates at issue.4
Plaintiffs argue that even if Walker’s and MacKay’s reasoning has not
been discredited, it was undermined by the insurance commissioner’s 2020
bulletins and the “limited” refunds CSAA provided as a result. They question
how CSAA could have lawfully provided those refunds if section 1861.01(c)
required it to charge approved rates. As a preliminary matter, we note that
the bulletins did not expressly state the authority under which their
directives were issued, let alone contend that the refunds were consistent
with section 1861.01(c) or required by any independent obligation of insurers
under section 1861.05. More importantly, we have no occasion to opine on
that authority, as plaintiffs correctly assert that the commissioner’s power to
direct refunds “is not at issue in this appeal.”
Plaintiffs’ third contention in arguing that Lara was wrongly decided is
that the decision contradicts two other state Supreme Court cases—Calfarm

4 CSAA has also made clear that its demurrer was not based on any

assertion that the insurance commissioner has exclusive jurisdiction over
rates. (See Villanueva, supra, 11 Cal.5th at pp. 126–133 [rejecting exclusive
jurisdiction argument]); Donabedian v. Mercury Ins. Co. (2004) 116
Cal.App.4th 968, 986–987 [same].)

16
and 20th Century. Not so. As Lara correctly explained, these cases “were
early and significant decisions regarding Proposition 103, and specifically the
rollback period.” (Lara, supra, 71 Cal.App.5th at p. 161, italics added.)
Calfarm largely rejected a constitutional challenge to the rollback period,
concluding that it did not deprive insurers of due process given the
safeguards built into the regime. (Calfarm, supra, 48 Cal.3d at pp. 814–815.)
Then, 20th Century rejected a challenge by insurers to the validity of rate
regulations implementing the rollback period. (20th Century, supra, 8
Cal.4th at p. 241.)
We agree with plaintiffs that Calfarm and 20th Century generally
described the dual obligations of section 1861.05(a) as the “approval” and
“maintenance” of rates but, as discussed above, we interpret these as
references to the insurance commissioner’s approval and review of rates.
(Calfarm, supra, 48 Cal.3d at p. 823; 20th Century, supra, 8 Cal.4th at
p. 245.)
Calfarm and 20th Century also discussed refunds, but contrary to
plaintiffs’ suggestion otherwise, each did so in the context of the rollback
period because refunds were expressly permitted during this limited time.
(Calfarm, supra, 48 Cal.3d at p. 825 [describing rollback period where insurer
could charge higher rates while application was pending, but could be
required to refund excess premiums after commissioner review]; 20th
Century, supra, 8 Cal.4th at p. 246 [same].) And Calfarm clarified that
section 1861.05(a)’s standard applied to rates charged during the rollback
period because the section “contains no language limiting its operation to
rates after November of 1989.” (Calfarm, at p. 823.) This reasoning dispels
any notion that the concept of refunds from the temporary rollback period

17
should be read into the permanent “prior approval” regime, as the provision
implementing the rollback period was explicitly time-limited. (§ 1861.01.)
In sum, we conclude that section 1861.05(a) does not impose an
independent obligation on insurers to retroactively refund premiums, based
on rates that were approved by the insurance commissioner, when those
rates later become purportedly excessive.5
D. UCL “Unfair” Cause of Action
Even accepting our interpretation of section 1861.05(a) and its
foreclosure of their claim that CSAA’s conduct was unlawful, plaintiffs argue
that the “inquiry is not over” because they also asserted a cause of action
under the unfair prong of the UCL.
As explained in Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163 (Cel-Tech), in order to “guide courts and
the business community adequately and to promote consumer protection, . . .
any finding of unfairness to competitors under [Business and Professions
Code] section 17200 [must] be tethered to some legislatively declared policy
or proof of some actual or threatened impact on competition.” (Id. at pp. 186–
187; see also Gregory v. Albertson’s Inc. (2002) 104 Cal.App.4th 845, 854
[noting that “where a claim of an unfair act or practice is predicated on public
policy, we read Cel–Tech to require that the public policy which is a predicate
to the action must be ‘tethered’ to specific constitutional, statutory or
regulatory provisions”].) We agree with plaintiffs that their UCL unfair
cause of action was explicitly “tethered” to the expressly stated purpose of
Proposition 103, which enacted the statutory provisions at issue here, to
“protect consumers from arbitrary insurance rates and practices” and “ensure

5 In reaching this conclusion, we need not and do not address CSAA’s

additional arguments regarding how “insurance works” under sections 480
and 482, or how decreased driving might affect future rates.

18
that insurance is fair, available, and affordable for all Californians.” (Cel-
Tech, at p. 186; Ballot Pamp., Gen. Elec., supra, text of Prop. 103, § 2, p. 99.)
But Cel-Tech directed that its principles be applied in a two-step
process, by determining (1) whether the Legislature (or presumably, voters
enacting initiatives) provided a “safe harbor” that “affirmatively permits” the
defendant’s conduct; and if not, (2) whether the conduct is unfair. (Cel-Tech,
supra, 20 Cal.4th at p. 187.) Plaintiffs argue that here, the answer at the
first step is “no,” because nothing in Proposition 103 expressly permitted
CSAA to maintain its previously approved rates when they became excessive
during the COVID-19 pandemic. But we agree with Lara that the plain
language of section 1861.01(c), requiring that rates “be approved by the
commissioner prior to their use,” affirmatively permitted CSAA to charge
approved rates. (Lara, supra, 71 Cal.App.5th at p. 194.) We thus conclude
that the trial court properly sustained CSAA’s demurrer on both causes of
action without leave to amend.6
III.
DISPOSITION
The judgment is affirmed. CSAA is awarded its costs on appeal.

6 Given this conclusion, we need not address CSAA’s alternative

argument that the restitution requested by plaintiffs is not an available
remedy under the UCL.

19
_________________________
Humes, P.J.

WE CONCUR:

_________________________
Banke, J.

_________________________
Langhorne Wilson, J.

Davis v. CSAA Insurance Exchange A169729

20
Trial Court:

Superior Court of the County of Alameda

Trial Judge:

Hon. Evelio M. Grillo

Counsel:

Consumer Watchdog, Harvey Rosenfield, Ryan Mellino; Nichols Kaster,
PLLP, Robert L. Schug; Mehri & Skalat, PLLC, Michael Lieder; Manfred,
APC, Manfred P. Muecke, for Plaintiffs and Appellants

Sheppard, Mullin, Richter & Hampton, LLP, Todd E. Lundel, Charles
A. Danaher, Theona Zhordania, for Defendant and Respondent

Davis v. CSAA Insurance Exchange A169729

21

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11134483. Public record. Not legal advice.